'Big 3,' dealers try to steer their way out of perilous skid in sales U.S. auto industry 'at critical point'

October 06, 1991|By Kim Clark

When he was 11 years old, Arnold Hornstein tried to break in to a neighborhood car dealership. The new 1961 Chevrolet Biscaynes and Bel Airs were hidden under tarps on the lot, ready for the ritual autumn unveiling. And Arnold was crazy for an early peek.

On a morning 31 years later, Mr. Hornstein sips coffee while he surveys another Chevrolet lot, lined with 1992 Cavaliers and Corvettes.

There are no tarps. No secrets.

And no customers.

"This used to be a big event," says Mr. Hornstein, a salesman at Fox Chevrolet in Woodlawn for 13 years.

After nearly 20 years of battling gasoline shortages and foreign competition, U.S. automakers "are at the critical point," says David Andrea, head of the University of Michigan's Office for the Study of Automotive Transportation.

The "Big Three" domestic automakers have lost sales at a terrifying rate in the last five years, dropping from 7.8 million cars a year in 1986 to an expected 5 million this year.

If General Motors Corp., Ford Motor Co. and Chrysler Corp. don't stem the decline soon, they may lose their pre-eminence, Mr. Andrea warns.

Looking out over the Northeast's biggest Chevrolet dealership, Mr. Hornstein sees hope that, finally, the grim economic outlook has forced a new pragmatism throughout the domestic car industry.

He collected commissions on 12 cars in August. That's not great, but it was twice as many as he sold in January, his worst month ever. He says he is winning customers over now that Chevrolet is emphasizing safety and longer warranties and has cut back on ads using models.

But deep problems remain. Mr. Hornstein's August sales, while better than January's, were about half what they were in the 1980s.

Salesmen such as Mr. Hornstein are struggling with a confusing mix of price increases and rebates. There are some signs that industry reforms aren't deep enough to make a difference. And many shoppers simply don't have the cash or credit to make a purchase.

Working out of a recession

The nine other salesmen on duty at Fox this morning lean, arms crossed, against the shiny cars in the showroom or hunch over telephones.

Mr. Hornstein, whose pay comes only from commissions, grabs a computerized list of all recent visitors to the showroom and repair shop. From his orange, three-sided cubicle, he starts dialing these "leads" to tell them of a coming sale.

"People like you have got to trade in their cars," he tells the woman on the line. "You're not supposed to fall in love with your car and keep it forever. That's un-American," he jokes. He reminds her to ask for him if she visits. If she doesn't, another salesman might collect the commission (averaging $150 per new car, plus "spiffs," or bonuses, for selling add-ons such as mobile telephones).

Mr. Hornstein says he has noticed that many of the people he calls are avoiding him.

Mr. Hornstein says he must be "positive" to survive in his job, that people don't buy cars from depressed salesmen.

"We have to be up," he said, "If everybody is really up and smiling, you can feel it. There is a rhythm to it."

But the only audible rhythm this morning is the soft beat of the canned music playing above the orange-carpeted showroom.

Fighting the Japanese

Mr. Hornstein says American consumers are biased against U.S. carmakers. He recalls the years he tried to sell Chevrolet Novas, produced at a California plant run by a GM-Toyota joint venture that also made the popular Toyota Corolla. Though the Chevy was built alongside the Toyota and was often priced below its competitors, it didn't sell well. Chevrolet eventually replaced the Nova with a new line called Geo.

Today, Mr. Hornstein argues, Chevrolet matches or exceeds the Japanese models in quality and value.

Maybe so. But consumers have been slow to buy that pitch. Sales of Toyotas, Hondas and Mazdas aren't sinking as quickly as those of their competitors here. The Big Three dropped to their lowest share of domestic car sales ever -- 58 percent -- this year. Early this year, Honda surpassed Chrysler in monthly domestic car sales, a sign that the third member of the Big Three might soon be a Japanese company.

Falling car sales have meant cutbacks in every aspect of the industry. Layoffs and plant shutdowns this spring dropped domestic production to its lowest level in 33 years. GM took a $2 billion charge against earnings as it shuttered plants and laid off thousands of workers.

The ripples have been felt at dealerships, too. J. D. Power & Associates, an industry research firm, says that half the dealerships in the country are losing money this year, even though staffing has dropped by 20 percent since 1989.

At Fox, management has eliminated some positions and cut everything from inventory to office costs. The company no longer mails customers gifts, such as boxes of cookies.

Personal service

Hoping to secure a customer, Mr. Hornstein checks an office computer to determine whether any nearby dealer might have a blue 1992 Cavalier in stock.